Farm bill conference continues

No

Tue, 2013-11-19 16:19

The 41 members of the U.S. House and Senate Conference Committee, designated to determine a new farm bill, are in the process of trying to reach a compromise on the versions of the new farm bill that were passed earlier this year by both the Senate and House. There are a lot of major differences in the two versions of the farm bill that need to be worked out by the Conference Committee, as well as some other issues that will likely impact the debate. The current farm bill extension expired on Sept. 30, 2013, with many programs and provisions set to be discontinued after Dec. 31, 2013, so timing is very critical for this Conference Committee.

The Congressional Budget Office (CBO) in May estimated that the current farm bill would require $973 billion over the next ten years from fiscal year 2014-2023, or $97.3 billion per year, without any reductions in expenditures. The Sequestration legislation approved by Congress earlier this year would reduce the spending on the new farm bill by $6.4 billion over the next 10-years, putting the total spending at $966 billion. The proposed U.S. Senate farm bill would reduce total spending by $17.9 billion over the next ten years, and by $24.3 billion, if the sequestration cuts are included. By comparison, the U.S. House version of the new farm bill would reduce total spending by $51.9 billion over the next decade, and by $58.3 billion with the inclusion of the sequestration cuts.

Following are some of the key issues that need to be resolved in order to reach a compromise on a new farm bill:

Supplemental Nutrition Assistance Program (SNAP): It is estimated that approximately 79% of the proposed funding for the new farm bill will go to the SNAP related programs, including food stamps. One of the biggest differences in the U.S. Senate and U.S. House versions of the new farm bill is in the proposed future funding for SNAP programs. The version of the new farm bill passed by the U.S. Senate would cut the spending on SNAP programs by about $400 million per year (0.5%), or $4 billion over ten years. By comparison, the U.S. House proposal would cut SNAP funding by about $3.9 billion per year (5.1%), or approximately $39 billion over ten years. The proposed funding level for the SNAP programs is likely to be a major “sticking point” in reaching a final compromise on a new farm bill, as both sides are fairly well entrenched in their positions. The U.S. House also proposed to tighten limitations on how various States administer some of the SNAP programs, which was not included in the U.S. Senate farm bill.

The Farm Safety-Net Programs: Both the U.S. House and Senate versions of the new farm bill would both offer crop producers a new safety net program to replace the existing direct and counter-cyclicalpayment (DCP) program. Direct and counter-cyclical payments, as well as the ACRE and SURE programs, would all be eliminated and replaced with a new risk management program. The issue of whether all crop producers should be under one large program, as in the Senate version of the farm bill, or be covered under the House version, which offers a choice between a price support or a revenue-based program, will need to be negotiated. The House version uses established crop target prices, which are updated from the current DCP program, while the Senate version uses rolling prices that are updated each year, and are based on the 5-year Olympic average price for each crop. There are also differences on whether program payments are made on historical crop base acres, or current planted acres.

Crop Insurance: The Federal crop insurance program has been proposed to remain largely intact in both versions of the new farm bill, with some minor adjustments and possible enhancements; however, there are likely to be several proposals to alter crop insurance provisions in the new farm bill. The Senate farm bill would link conservation compliance to the purchase of Federal crop insurance, which is not included in the House farm bill, and is somewhat controversial. The Senate version of the farm bill would reduce the crop insurance subsidy level by 15% for farmers above $750,000 adjusted gross income (AGI), which also is not in the House Bill. There could also be other changes proposed to the crop insurance program.

Permanent Farm Law: For over fifty years, if an existing farm bill expires, and no new farm bill or extension is passed, the so-called “permanent farm law” kicks-in, which originates back to farm legislation passed in 1938, and updated in 1949. The House version of the farm bill would propose to eliminate “permanent farm law”, and replace it with the Title 1 commodity program provisions in the final version of the new farm bill. This was not addressed in the Senate farm bill, and is opposed by most farm organizations.

Will there be a compromise farm bill that comes out of the Conference Committee by the end of the year? There are certainly reasons that this could become reality; however, there are some major legislative and philosophical differences that need to be worked out, especially related to the SNAP funding and program provisions. Even if a new farm bill passes out of the Conference Committee, it must then be passed by both the full U.S. Senate and the U.S. House, which could be difficult to achieve. There is also some possibility that a new farm bill could somehow be linked to the ongoing Federal budget legislation later this year, or in early 2014.

Of course, if no agreement can be reached on a new farm bill by the end of 2013, there is always the possibility that the current farm bill could be extended for another one or two years, similar to the extension for the 2013 crop year. It is also possible that direct payments could be cut or eliminated with an extension, as a part of federal budget saving measures. It is highly doubtful that the permanent farm law will be allowed to kick in after Jan. 1, 2014; however, some policy experts feel that this is not out of the realm of possibilities, given the current political divide that exists in Congress.